US Government Is Interested in Tracking Privacy Coins, New Document Shows

The U.S. Department of Homeland Security (DHS) wants to know if tracking transactions conducted using privacy coins is feasible.

A new pre-solicitation document published by the DHS Small Business Innovation Research Program discusses the use of cryptocurrencies such as bitcoin for transactions. While the document notes that there are both commercial and government uses for crypto, the topic specifically focuses on finding a way to conduct forensic analysis on privacy-focused coins if they are used for criminal activity.

In the document, DHS highlights that platforms such as zcash and monero emphasize privacy and anonymity as key features, making it difficult to determine where a transaction originates or how much is sent.

“While these features are desirable, there is similarly a compelling interest in tracing and understanding transactions and actions on the blockchain of an illegal nature,” it reads.

From the document:

“This proposal calls for solutions that enable law enforcement investigations to perform forensic analysis on blockchain transactions. This analysis can be approached in any number of ways and may consider different data situation use cases depending on whether additional data from off-chain sources are available.”

While the document cites zcash and monero as two examples of privacy-focused cryptocurrencies, it also notes that new platforms can be developed with similar features. As such, any proposed solution would have to either be applicable more generally or “provide working approaches to treating newer blockchain implementations.”

The file outlines three phases such a proposal would follow.

The document notes that it is neither a solicitation nor a Request for Proposals, meaning the agency is not looking for specific solutions at this time. Rather, interested parties can contact topic authors until Dec. 18 to either provide a comment or ask technical questions. The actual solicitation is expected to be released around Dec. 19.

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